Termination

Introduction

A contract may come to an end in **four principal ways**: by **performance**, by **agreement**, by **breach** (giving rise to a right to terminate), and by **frustration**. Termination **discharges the parties from future performance**; it does **not** wipe out accrued rights and obligations. This chapter works through each route to discharge — the strict **entire-obligation rule** (*Cutter v Powell*) and its mitigations, discharge by **bilateral and unilateral agreement**, the **innocent party's election** on a repudiatory breach, **anticipatory breach**, the doctrine of **frustration**, and the financial regime under the **Law Reform (Frustrated Contracts) Act 1943**.

Assessment focus

For SQE1 FLK1 you must distinguish sharply between a contract that is **terminated** (i.e. discharged) and one that is merely **suspended**; between contracts discharged by the **parties' election** (performance, agreement, election to terminate for breach) and those discharged **automatically by operation of law** (frustration); and between **repudiatory breach** (which gives the innocent party the option to **affirm or terminate**) and **non-repudiatory breach** (which gives **damages only**). Expect single best answer questions (SBAQs) requiring application of the **entire-obligation rule** (*Cutter v Powell*) and its exceptions (substantial performance, divisibility, acceptance, prevention), the **conditions for frustration**, and the **1943 Act remedies**. You should also be able to identify **anticipatory breach** and analyse the innocent party's choice between **affirmation** (*White & Carter v McGregor*) and **acceptance of repudiation**. This is a closed-book assessment: be ready to apply, not merely recall.

Study tips

1) Lock in the **four routes to discharge**: performance, agreement, breach, frustration. 2) For performance, master the **entire-obligation rule** (*Cutter v Powell*) and its **five mitigations** (divisibility, substantial performance, acceptance, prevention, tender). 3) For breach, walk the **four-step structure**: classify the term → identify the breach → decide if repudiatory → ask whether the innocent party **affirmed or accepted**. 4) Remember **frustration is automatic** and **narrow**: mere hardship, foreseeable events and self-induced events do **not** frustrate. 5) Memorise the **1943 Act**: s.1(2) money paid/payable, with discretion for expenses (capped); s.1(3) just sum for a non-monetary **valuable benefit** (*BP Exploration v Hunt*).